Before you can start exit planning, you’ll need to think about where you want to end up. What does retirement look like for you, and what do you need from your business to get there? Many business owners put profits back into the company to fuel growth without building savings outside the business. If that’s the case, you may be forced to sell to the highest bidder, without the option to sell your business to a family member or employee. It’s also common for owners to run expenses like cars, country club memberships, and travel through their business, making the business appear less profitable and thus less attractive to potential buyers. This practice can muddy your personal financial picture as well, leaving you with expenses in retirement that you didn’t account for. An experienced exit planner will work with you to clean up your cash flow, determine what you need to enjoy financial freedom in retirement, and develop a model outlining the best path to get you there.
Unpleasant as it is to consider, it’s also important to think about a potential unplanned exit, and to have a comprehensive plan in place that works no matter what. Proactively planning for events like health or personal issues that could necessitate your early departure from the business will minimize disruption, protect your financial health and legacy, and facilitate a smooth transition in the event of your untimely exit.
Regardless of the size or nature of your business, it’s almost always better to sell than to close up shop. Your track record, reputation, employees, and customer list all have inherent worth. An exit plan will guide your decision-making in order to maximize profits, minimize losses, and train top employees for leadership roles based on your anticipated sale timeline. The sooner you start planning, the greater the likelihood you’ll realize your vision for retirement. You’ve invested your time and expertise in order to build your business, and ensuring a successful exit from the company you’ve worked so hard to create is deserving of time and expertise as well.
